Viking Airtech Pte Ltd v Foo Teow Keng and Another

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 12 October 2007
• Neutral Citation: [2007] SGHC 176
• Date: 12 October 2007
• Subject Matter: Whether former director and competing company liable for conversion,Former director of company diverting business to competing company,Whether former director in breach of fiduciary duty,Whether competing company liable as accessory,Companies,Directors,Conversion,Tort,Liabilities,Former director of company taking over premises and equipment of company's overseas office on behalf of competing company
• Docket Number: Suit No 111 of 2006
• Published date: 28 November 2007
• Defendant Counsel: Mimi Oh (Mimi Oh & Associates)
• Court: High Court (Singapore)
• Plaintiff Counsel: Liew Chen Mine (Aptus Law Corporation)

12 October 2007 Judgment reserved.

Judith Prakash J

Introduction

1 The plaintiff, Viking Airtech Pte Ltd, is a company incorporated in Singapore. Its main business is to design, supply, install and commission heating, ventilation and air-conditioning systems for marine vessels. The first defendant, Foo Teow Keng (also known as George Foo), was a shareholder of the plaintiff and, prior to his resignation on 6 November 2003, he held the posts of director and general manager of the plaintiff. The second defendant, JL Marine & Engineering Pte Ltd, is a company incorporated in Singapore in mid 2003 and it carries on the same business as the plaintiff does in competition with the plaintiff.

2 The plaintiff claims that Mr Foo acted in breach of his fiduciary and other duties to the plaintiff and diverted business from the plaintiff to the second defendant. It seeks damages to be assessed against both defendants in respect of the diverted business. Alternatively, it wants an account of profits made by the second defendant in relation to the business diverted to it and a consequential order for payment after the taking of the account. Further, the plaintiff seeks damages to be assessed against Mr Foo for conversion of the plaintiff’s assets in Shanghai.

Background

3 In 1994, a company called Viking Engineering Pte Ltd (“Viking Engineering”), which is a ship repairer, procured the incorporation of the plaintiff company for the purpose of taking over its heating, ventilation and air-conditioning business (a business that is referred to as the “HVAC” business in the marine industry). Viking Engineering recruited Mr Foo to build up the HVAC business as he had experience in HVAC systems and Mr Foo then took up 30% of the initial issued and paid up capital of the plaintiff and was appointed a director of the plaintiff. The other directors of the plaintiff were one Mr Ong Choo Guan, one Mr Bo Johansson and one Mr Sune Andersson. Mr Ong had a minority interest in the plaintiff whilst the majority shareholder was Viking Engineering (51%) which itself was owned by Mr Johansson and Mr Andersson.

4 Mr Foo was initially employed as a manager of the plaintiff and was promoted to general manager in about 1998. He held this post until his resignation in November 2003. As general manager, Mr Foo had overall charge of the plaintiff’s operations. He dealt with its customers including two Indonesian shipyards called PT Pal Indonesia (Persero) (“PT Pal”) and PT Dok Dan Perkapalan Surabaya (Persero) (“PT Dok”).

5 In 1999, the plaintiff engaged a firm known as Jin Lian Marine Engineering & Trading (“Jin Lian”) as its in-house sub-contractor for the purpose of supplying and supervising workers from China for the plaintiff’s operations. The sole proprietor of Jin Lian was a lady named Yang Ling who was herself a Chinese national. Mr Foo and Mdm Yang were married in June 2003.

6 On 30 August 2003, Jin Lian’s sub-contract with the plaintiff was terminated by Mr Ong. Mdm Yang, who had had an office in the plaintiff’s premises, then moved to premises at Jurong West Avenue 1 occupied by two friends of Mr Foo, one Ho Fong Jun and one Ng Wei Lip. On 5 September 2003, the second defendant was incorporated. At the time of its incorporation, the second defendant was called “Viking HVAC & Automation Pte Ltd”. Its original shareholders and directors were the said Ho Fong Jun and Ng Wei Lip and its registered office was at the premises occupied by Mdm Yang’s firm, Jin Lian.

7 On 16 September 2003, a contract was signed between the second defendant and PT Dok whereby the second defendant undertook to sell and deliver an air-conditioning system and various other items which were required to be installed in an oil tanker which PT Dok was building for Pertamina, the Indonesian state oil company. The value of the contract was US$149,000. The contract was signed on behalf of the second defendant by Mr Foo as its general manager although at that time Mr Foo still held his posts in the plaintiff.

8 On 23 September 2003, a contract was signed between the second defendant and PT Pal whereby the second defendant undertook to sell and deliver an air-conditioning system and various other items which were required to be installed in a oil tanker which PT Pal was building for Pertamina. The value of the contract was US$198,000. The contract was signed on behalf of the second defendant by Mr Foo, as its general manager.

9 In the meantime, in early August 2003, PT Pal had given the plaintiff written confirmation of its order for a HVAC system for a tug boat called “Pelindo II”. A formal purchase contract was signed between PT Pal and the plaintiff on 19 August 2003. Mr Foo was the person who signed the contract on the plaintiff’s behalf. The contract provided that PT Pal was to establish an irrevocable letter of credit for the full amount of the purchase price of US$29,900 and that payment could be drawn under the credit by presentation of the shipping documents for the equipment. In October 2003, PT Pal established a letter of credit but the name of the beneficiary was stated to be “Viking HVAC & Automation Pte Ltd” and the letter of credit was sent to the second defendant’s office instead of to the plaintiff. In January 2004, the plaintiff discovered a complete HVAC system in its warehouse that had been constructed for the “Pelindo II” and was surprised that PT Pal had not asked it to make delivery of the equipment earlier. The plaintiff subsequently discovered from PT Pal that the HVAC system for “Pelindo II” was delivered to it on 19 January 2004 by the second defendant.

10 Mr Foo was not happy with the actions of Mr Ong whom he considered had, with the support of Mr Bo Johansson, been interfering in the plaintiff’s business in order to marginalise and undermine Mr Foo’s position in the plaintiff. In August 2003, Mr Ong employed one Mr Ng Seng Joo as an assistant manager to assist Mr Foo. On 5 November 2003, Mr Ong sent Mr Foo an e-mail in which he suggested that Mr Foo concentrate on marketing while Mr Ong would take over the management of plaintiff. The next morning, Mr Foo tendered his resignation and left the plaintiff immediately. His position was taken over by Mr Ng Seng Joo.

11 On or about 2 December 2003, Mdm Yang and Mr Foo took over the second defendant from Mr Ho and Mr Ng. They became the sole directors and shareholders of the second defendant. No consideration was paid for their acquisition of the shares in the second defendant. According to Mr Foo, there was no sale and purchase agreement between them and Mr Ho and Mr Ng in relation of the takeover because at the time the second defendant had no assets. The couple increased the paid-up capital of the second defendant to $200,000. In the result, Mdm Yang held 60% of the shares in the second defendant while Mr Foo held 40% thereof. In February 2004, the Registrar of Companies and Businesses, consequent upon a complaint made by the plaintiff, directed the second defendant to change its name to one that did not resemble the plaintiff’s or Viking Engineering’s name. After an unsuccessful appeal against this directive, the second defendant changed its name to JL Marine & Engineering Pte Ltd in May 2005.

12 Whilst working for the plaintiff, Mr Foo had set up an office for it in Shanghai. The office manager was one Mr Joseph Zhang who was the brother of Mdm Yang. According to Mr Ong, at the time, the plaintiff did not know of the relationship between the two. On 10 November 2003, Mr Ong flew to Shanghai to check on the plaintiff’s office in Shanghai. He was unable to gain access to the premises. Mr Zhang did not return his repeated calls and goods which had been delivered to the Shanghai office were not sent from there to the customers. Subsequently, the plaintiff’s signboard was taken down and the second defendant’s signboard was put up and the Shanghai office became, practically overnight, the second defendant’s office. The plaintiff had to open a new Shanghai office. It was not able to retrieve any of its equipment and other belongings from the original Shanghai office.

13 The disputes between Mr Foo and his former partners did not end there. Mr Foo started an action in the High Court (Suit 625/2004) against Mr Ong, Mr Johansson and Viking Engineering for relief on grounds of their oppressive conduct against him as a minority shareholder of the plaintiff herein. He was successful in this action and, in June 2005, an order was made for the compulsory purchase of his shares in the plaintiff herein. Subsequently, pursuant to a settlement agreement between the parties, Mr Foo was paid $300,000 for his shares in the plaintiff.

The claims and the defence

14 The plaintiff originally made six separate claims against the defendants but by the time the trial started, these had been reduced to four. These were as follows:

(a) a claim for damages on the basis that the plaintiff had lost profits estimated at 30% of the contract value (US$198,000) in respect of the contract between the second defendant and PT Pal relating to the Pertamina tanker;

(b) a claim for damages on the basis that the plaintiff had lost profits estimated at 30% of the contract value (US$149,000) in respect of the contract between the second defendant and PT Dok relating to another Pertamina tanker;

(c) a claim for damages in respect of the supply of equipment to PT Pal for the tugboat “Pelindo II”; and

(d) damages for conversion of the furniture and fittings and equipment belonging to the plaintiff’s Shanghai office.

15 The defendants denied liability. Mr Foo’s...